Private Limited Company

Private Limited Company

The growth of trade and business led to many problems that traditional forms of business did not solve. For example, the unlimited liability feature of a sole proprietorship form of business resulted in people forming partnerships, but even that proved to be too inadequate and risky. This is when the concept of companies emerged, and private companies form of business is the oldest example of it.
Defination
Section 2(68) of Companies Act, 2013 defines private companies. According to that, private companies are those companies whose articles of association restrict the transferability of shares and prevent the public at large from subscribing to them. This is the basic criterion that differentiates private companies from public companies.
The Section further says private companies can have a maximum of 200 members (except for One Person Companies). This number does not include present and former employees who are also members. Moreover, more than two persons who own shares jointly are treated as a single member.
This definition had previously prescribed a minimum paid-up share capital of Rs. 1 lakh for private companies, but an amendment in 2005 removed this requirement. Private companies can now have a minimum paid-up capital of any amount.

Features

These are some features that distinguish private companies from other types of companies:

  1. No minimum capital required:
  2. There was a minimum paid-up share capital requirement of Rs. 1 lakh previously, but that is omitted now.
  3. Minimum 2 and maximum 200 members:
  4. A private company can have a minimum of just two members (but just one is enough if it a One Person Company), and maximum of up to 200 members.
  5. Transferability of shares restricted:
  6. Private companies cannot freely transfer their shares to the public like public companies. This is why stock exchanges never list private companies.
  7. “Private Limited”:
  8. All private companies must include the words “Private Limited” or “Pvt. Ltd.” in their names.
  9. Privileges and exemptions:
  10. Since private companies do not freely transfer their shares and involve limited interest by members, the law has granted them several exemptions that public companies do not enjoy.

Documents Required

List of Documents for Digital Signature Certificate:

  • Passport size photograph of applicant;
  • Self-attested Address proof of applicant; and
  • Self-attested PAN card of applicant.

Registration Procedure

  1. Step 1: Procure Digital Signature Certificate:
  2. The first and foremost step is to procure the DSCs of the Personnel involved in Private Company Incorporation in India. The requirement of DSCs arises for filling of e-forms on online portal of MCA as the Ministry has prescribed provided for online registration procedure for company incorporation and other applications. Digital Signature Certificate, commonly known as DSC are issued by the Certifying Authority in token form and is valid for 1 or 2 years.
    The personnel involved in company formation in India are Subscribers and Directors for proposed company. The Subscriber is a person who is the promoter of the company and proposed shareholders. The said shareholders are required to file e-MOA and e-AOA by affixing DSCs whereas proposed directors shall obtain DIN by making an online application in next step.
  3. Step 2: Obtain Director Identification Number
  4. Director Identification Number (DIN) is a unique number assigned by Ministry of Corporate Affairs to the individual making an application for allotment of DIN. The number is allotted for lifetime by the Ministry unless it is surrendered or withdrawn.
    The directors of the company shall obtain and intimate the DIN while Private Ltd company incorporation. Hence, obtaining DIN is mandatory to be appointed as Director in any Company. The Director Identification Number obtained can also be used for appointment for any other company and appointment as Designated Partner in the LLP.
  5. Step 3: Reservation of Name
  6. Before making an application to incorporate and register Pvt Ltd Company in India, the name for the proposed company shall be reserved. An Application for Reservation of Name of Private Limited Company shall be made in e-Form INC – 1 by making payment of requisite fees. In one application you may provide maximum 6 names in preferential order along with the significance for application for proposed name(s). The appointed professional shall make a search for availability of name before filling the application so that the applicant can make application of the names accordingly. The Registrar enjoys 100% discretion for approval of name application. The person shall make an application for name approval considering the provisions laid down by the Act.
    following general practise are adhered to choose and apply the name:
    • The name should be easy to spell and remember
    • The name shall be able to provide a distinct identity to the company;
    • It should be short & simple;
    • The name should not contain any word as opposed to public policy or prohibited;
    • It should not infringe any Trademark registered nor shall be similar or identical to any company/ LLP registered.

    As stated above, the application for name reservation can be made with maximum 6 names, out of which the registrar may approve any one name or may ask to provide additional names with remarks. Once the application made is approved, the registrar shall reserve the same name for a period of 60 days. The promoters in guidance with the Professional shall make the application for incorporation of company within prescribed period of 60 days, failing to which the name reserved shall lapse and therefore fresh application shall be made for reservation of name for further period of 60 days.
  7. Step 4: Certificate of Incorporation:
  8. After reservation of the name for proposed company by submitting form INC – 1, the application for issuance of Certificate of Incorporation shall be made. The application for online registration for company is also required to be made by online submission of Simplified Proforma for Incorporating Company Electronically i.e. SPIC-e forms.
    Drafting MoA & AoA
    Both, MoA and AoA are charter document for a Private Limited Company. MoA stands for Memorandum of Association of company and AoA is abbreviated form of Articles of Association.
    Memorandum of Association of Company  prescribes the scope of operations of company by enumerating the main object and activities of the company. Whereas the Articles of Association provides in what manner the operations and administration shall be carried on. Both documents having vital importance shall be drafted very carefully after consultation of Professional.
    The memorandum and Articles of the company shall also be filed in SPIC-e forms along with application for company formation and registration in India. The subscription to MoA and AoA shall be made by affixing DSCs of subscribers in electronic form.
    Documents to accompany the Application
    • Utility Bill and NOC from the owner for the Registered Office address of the Company;
    • Rental Agreement with the owner of registered office & Rent receipts, if premises is rented;
    • Consent to act as a Director of the company in form DIR – 2;
    • Affidavit and declaration by first subscriber(s) and director(s) in form INC – 9 (duly franked and notarized);
    • Certified True copy of the self-attested Identity proof of the first subscriber(s) and director(s).
The application is submitted by paying the requisite Government Fess and Stamp Duty as applicable in case of concerned state on the portal. The application and allotment of PAN and TAN are also processed with the same application.
On review and verification of the application made for certificate of incorporation in SPIC-e forms, the Registrar on his satisfaction may issue the Certificate of Incorporation under his seal and signature in electronic form. The Certificate of Incorporation (CoI) issued will include the date of incorporation as well as the Permanent Account Number (PAN) of the company.

Advantages

Advantage

  • Restricted Liability:
    This ensures the advantages of the investors in the event that if the organization must be closed because of a monetary emergency, or if in the event that there is any misrepresentation, the proprietor will dependably have the privilege to secure his/her benefits/share capital.
  • Pull in Funding:
    It syndicates both value and obligation assets to have an ideal capital structure and draws in subsidizing from various sources like financial speculators, swarms subsidizing and so forth.
  • Building the TEAM:
    By offering stocks and proprietorship to the worker’s gifts can be held. This procedure is on an ascent where stock offering holds abilities.
  • Validity Improvement:
    As it is enlisted as a corporate substance the believability is enhanced, and it builds reliability in the market.
  • Confinement on the exchange of Shares:It is a preference for different accomplices, as the investors who may wish to pitch their offers to outcasts can’t do as such. By the organization’s Act of 1984, it counteracts them to do as such.
  • Presence Continues:
    Even after the demise and exit of any investor, the firm proceeds and its reality is protected

FAQ's

Any individual can become a shareholder in a private limited company. For becoming a director in a company, no professional or educational qualification is required.

The Registered office does not mean to be owned only; it can be rented premises also. The registered office is used for the purpose of holding a general meeting, keeping records and receiving correspondence from all the statutory government timely. It also specifies the jurisdiction of the registered office.

Yes, we can easily change the registered office of the company any time after the specified procedure is completed. The changed address can be situated within the same state or in a different state, depending upon the conditions.

It provides creditability to business in the eyes of financial institutions, suppliers and potential clients. As it makes easier for companies to get loans at favourable terms from banks or convincing potential clients while entering into deals.

Yes, any foreign nationals, entity or an NRI can become a director or shareholder of a private limited company in India.

Ministry of Corporate Affairs has introduced a new form called the SPICe INC- 32 form for the faster company incorporation. Apart from this, to register a private limited company, an e- MoA (INC-33) and e- AoA (INC- 34) are also to be submitted with the above form.

Yes, the private limited company can be converted into private company registration after following the companies act, 2013 procedures.

Submit A Query

Manish Moyal

Director

I am very pleased with the project you have done, and especially your commitment to providing a quality solution when it meant going the extra mile to do so.

Bharat Arora

Director

WE WORKED WITH THELEGALBANK TO REGISTERED OUR COMPANY Protocloud Technologies PVT. LTD. THE COMPANY IMPRESSED US WITH THEIR SERVICES.

Puspandra

Director

WE WORKED WITH THELEGALBANK TO REGISTERED OUR COMPANY PIXYRS SOFTECH & RESEARCH PRIVATE LIMITED THE COMPANY IMPRESSED US WITH THEIR SERVICES.

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